Pepsi 2007 Annual Report Download - page 79

In the second quarter of 2007, we
issued $1 billion of senior unsecured notes
maturing in 2012. We used a portion of
the proceeds from the issuance of the
notes to repay existing short-term debt
of $500 million, bearing interest at 3.2%
per year and maturing on May 15, 2007,
with the balance of the proceeds used
primarily for general corporate purposes.
Additionally, in the second quarter of
2007, we extended the maturity of our
$1.5 billion unsecured revolving credit
agreement by one year to 2012, and, in
the third quarter of 2007, we increased
the amount of this agreement from
$1.5 billion to $2 billion. Funds borrowed
under this agreement may be used for
general corporate purposes, including
supporting our outstanding commercial
paper issuances. This line of credit remains
unused as of December 29, 2007.
In the third quarter of 2007, we
updated our U.S. $2.5 billion euro
medium term note program following the
expiration of the existing program. Under
the program, we may issue unsecured
notes under mutually agreed upon terms
with the purchasers of the notes. Proceeds
from any issuance of notes may be used
for general corporate purposes, except as
otherwise specifi ed in the related prospec-
tus. As of December 29, 2007, we have
no outstanding notes under the program.
In the fourth quarter of 2007, we
issued $1 billion of senior unsecured
notes maturing in 2013. We used the
proceeds from the issuance of the notes
for general corporate purposes, including
the repayment of outstanding short-term
indebtedness.
As of December 29, 2007, we have
reclassifi ed $1.4 billion of short-term debt
to long-term based on our intent and abil-
ity to refi nance on a long-term basis.
In addition, as of December 29, 2007,
$806 million of our debt related to bor-
rowings from various lines of credit is
maintained for our international divi-
sions. These lines of credit are subject to
normal banking terms and conditions and
are fully committed to the extent of our
borrowings.
Interest Rate Swaps
In connection with the issuance of the
$1 billion notes in the second quarter
of 2007, we entered into an interest
rate swap to effectively convert the
interest rate from a fi xed rate of 5.15%
to a variable rate based on LIBOR. We
previously entered into an interest rate
swap in 2004 to effectively convert the
interest rate of a specifi c debt issuance
from a fi xed rate to a variable rate. This
interest rate swap matured in May 2007.
The terms of the swaps match the terms
of the debt they modify. The notional
amounts of the interest rate swaps
outstanding at December 29, 2007 and
December 30, 2006 were $1 billion and
$500 million, respectively.
At December 29, 2007, approximately
56% of total debt, after the impact of the
related interest rate swap, was exposed
to variable interest rates, compared to
63% at December 30, 2006. In addition
to variable rate long-term debt, all debt
with maturities of less than one year is
categorized as variable for purposes of
this measure.
Cross Currency Interest Rate Swaps
In 2004, we entered into a cross currency
interest rate swap to hedge the currency
exposure on U.S. dollar denominated debt
of $50 million held by a foreign affi liate.
The terms of this swap match the terms
of the debt it modifi es. The swap matures
in 2008. The unrealized loss related to
this swap was approximately $8 million
at December 29, 2007, resulting in a U.S.
dollar liability of $58 million. The unreal-
ized gain related to this swap was less
than $1 million at December 30, 2006,
resulting in a U.S. dollar liability of
$50 million.
We also entered into cross currency
interest rate swaps to hedge the currency
exposure on U.S. dollar denominated
intercompany debt of $45 million at
December 29, 2007 and $95 million at
December 30, 2006. The terms of the
swaps match the terms of the debt they
modify. The net unrealized losses related
to these swaps was less than $1 million
at December 29, 2007 and December
30, 2006. The outstanding swap matures
in 2008.
Note 9 — Debt Obligations and Commitments
2007 2006
Short-term debt obligations
Current maturities of long-term debt $ 526 $ 605
Commercial paper (4.3% and 5.3%) 361 792
Other borrowings (7.2% and 7.3%) 489 377
Amounts reclassified to long-term debt (1,376) (1,500)
$ – $ 274
Long-term debt obligations
Short-term borrowings, reclassified $1,376 $1,500
Notes due 2008-2026 (5.3% and 6.0%) 2,673 1,148
Zero coupon notes, $375 million due 2008-2012 (13.3%) 285 299
Other, due 2008-2016 (6.1% and 6.1%) 395 208
4,729 3,155
Less: current maturities of long-term debt obligations (526) (605)
$4,203 $2,550
The interest rates in the above table reflect weighted-average rates at year-end.
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